TORONTO • Barrick Gold Corp. said it would “carefully consider” an unprecedented rejection by shareholders of the company’s executive compensation plan on Wednesday, even as management strongly defended a record payment given to the co-chairman.

Barrick Gold Corp., once the largest gold miner in the world, is headed for a showdown with a prominent group of shareholders over executive compensation. Seven of Canada’s largest pension funds are fuming over a US$11.9-million signing bonus the Toronto-based company awarded former Wall Street investment banker John Thornton to join the company as co-chairman last year.
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The rejection at Barrick’s annual meeting here was a direct challenge to a board that last year agreed to pay US$17-million to co-chairman John Thornton, which included a staggering US$11.9-million signing bonus.

Barrick founder and chairman Peter Munk was defiant during the meeting, defending his company’s decision to bring on Mr. Thornton, a former president at Goldman Sachs.

“We had to secure him,” Mr. Munk told shareholders. “The right thing was to have this advanced investment … to secure the kind of access he could give us and the credibility he could provide us with in securing major capital.”

Under the terms of his hiring, Mr. Thornton had to invest the bonus in Barrick shares, which he did in December, paying a market price of about $33.50.

The compensation vote is non-binding, but Barrick CEO Jamie Sokalsky said management would carefully consider the views of shareholders. In a second vote, shareholders agreed to re-elect all 13 directors to Barrick’s board.

While 85% of votes cast were against Mr. Thornton’s pay package, an average of 82% of votes were cast in favour of each director’s reelection.

“I think it’s a bit more than symbolic,” said Barry Allan, senior mining analyst at Mackie Research Capital. “It’s certainly a statement about what is appropriate executive compensation as seen by the Canadian marketplace, saying basically [the salary] is not really performance-driven — which has been an endemic problem, particularly in the gold mining industry.”

But Mr. Allan said it’s unclear whether this will actually result in any scaling back of salaries already paid, but he predicted Barrick’s board would soon issue a statement that would seek to mollify shareholders and their concerns.

Wednesday’s annual meeting was one of the most tumultuous in the company’s history as attendance greatly exceeded that of previous years. Many shareholders were locked out of the theatre where the event was held after the hall reached capacity 30 minutes before it began.

Mr. Munk began his speech with a simple observation: “Bad times bring out more people.”

Indeed, Barrick has suffered a number of setbacks this year. The Toronto-based company has seen delays at Pascua-Lama, its giant development project on the Chile-Argentina border, while its stock has fallen to 20-year lows as the price of gold collapsed in the past month. It now has a smaller market cap than Vancouver-based Goldcorp Inc., a rival that has only one-third of Barrick’s gold production.

But Mr. Munk blamed more than just falling gold prices and trouble at the Pascua-Lama mine for Barrick’s problems. He lashed out at increasing “resource nationalism” in developing countries that made it more challenging for Barrick to do business.

Mr. Munk stressed that Mr. Thornton would be particularly well-suited to helping Barrick tackle the rising risks of doing business in such countries, particularly because of his time at Goldman Sachs and the fact he runs a prestigious business school in China.

The company said Wednesday it would take steps this year to address these challenges. It said it plans to cut at least US$500-million in spending on projects this year, and that it may sell non-core assets to help offset lower gold prices.

But at the end of the day, with Barrick’s stock sitting at its lowest level since 1993 — shares closed Wednesday at $19.38, up 7.6% — when gold prices averaged US$360 an ounce, it is executive salaries that have taken the spotlight.

The controversy over Mr. Thorton’s signing bonus gained steam last week after seven of Canada’s largest pension funds announced they would oppose the package and vote against the entire compensation committee.

Barrick has continued to increase pay for its executives even as the stock has slumped during the past year. Both Mr. Munk (who was paid US$4.3-million) and “ambassador” Brian Mulroney ($2.5-million) both received big increases last year.

Separately on Wednesday, Moody’s Investors Service announced it was downgrading $11-billion worth of Barrick’s senior unsecured debt by one notch to Baa2 from Baa1, and said the outlook remained negative. The ratings agency had announced last week it was putting the debt under review for a downgrade.

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